WineLaw.ca
Privatization and BC Wine Pricing in the News
- Saturday, 14 July 2012 10:00
- Written by Mark Hicken
The BC Government's liquor privatization project (the Distribution of Liquor Project or "DLP") has been in the news a great deal this past week, getting increasingly negative coverage. Many commentators have correctly identified that the existing government monopoly system is inefficient and flawed but have criticized the DLP process for a lack of transparency and failure to consult with both the public and industry. In addition, some have questioned the scope of the reforms being put forwards and the wisdom of replacing a public monopoly with a private one (particularly given that the new operator will be bound by existing BCGEU labour contracts and costs). There have been many stories but see in particular: multiple stories by Bob Mackin in BIV and the Tyee, multiple columns by Vaughn Palmer in the Vancouver Sun as well as a critical Sun editorial piece, Liquor monopoly silences competition, plus another editorial and other coverage of the issue by Bill Good on CKNW.
It is hard to argue with the criticism of the process. However, there is no doubt that the entire system is in dire need of reform. Unfortunately, it now appears that another opportunity to modernize and reform our outdated liquor distribution system is about to be lost due to poor policy making and implementation at the bureaucratic and political levels. In my view, the government needs to change its strategy to one that should have been in place all along: put the interests of consumers and voters first. BC has long suffered under an archaic prohibition-era system that restricts selection to government listed products and which fixes wine prices at exorbitant levels both by imposing absurd levels of taxation and by preventing competition. BC wine consumers and voters really only care about two things: selection and pricing. Proper reform of the system could provide major benefits on both those fronts but to achieve those goals, two objectives have to be accomplished: 1) the government should restrict its involvement in the liquor business to regulation along with the collection of fair taxation, and 2) the government should replace the current monopoly system with a competitive free market system at the wholesale and retail levels so that consumers and voters will see a meaningful increase in product selection and reduced retail prices. It would not be that difficult to achieve these goals: BC could simply adopt the best elements of the systems now in place in our neighbouring jurisdictions, Alberta and Washington state, both of which have privatized either entirely or almost entirely. In this respect, see my previous article, Two Wine Neighbours - Two Approaches to Liquor Regulation, and this recent op-ed in the Vancouver Sun: Province's Soviet-Style Liquor Monopoly Past Its Sell-By Date.
Unfortunately, at the present time, it is not clear whether the DLP will provide any benefits on selection or pricing, the only two areas that matter to consumers and voters. In this regard, government should probably change the DLP, change its message, or perhaps change both.
New BC Wine Shipping Rules - Legal Issues
- Thursday, 12 July 2012 09:57
- Written by Mark Hicken
As reported earlier this morning, the BC Government has announced that they will permit inter-provincial wine shipments in unlimited amounts for personal consumption from other provinces free of provincial liquor board markup (which is a form of hidden tax) if the wine is 100% Canadian wine and if the wine is shipped from the producing winery in the other province. The press release does not refer to the legal authority for this change which is important since the BC Government introduced a Liquor Possession Regulation last month which only permits BC residents to possess a cumulative total of 1 case of wine imported from another province at any given time and only if the wine was imported "in-person" rather than by shipment from a winery. Last month's regulation would have to be changed in order to give effect to the new policy. [Update July 13, 2012: the Liquor Possession Regulation has been amended to permit the possession of unlimited quantities of wine from other provinces (either shipped or imported "in-person") if the wine was purchased from a winery in another province and is made entirely from agricultural products grown or produced in the province where the winery is located.]
For wineries, the new policy is a step in the right direction. The BC government currently exempts all 100% BC wine from liquor board markup if the wine is delivered direct from the winery to consumers or to licensees within British Columbia. This exemption is significant because the base liquor board markup on wine is essentially a 123% hidden tax at the wholesale level. In respect of consumers, the new policy would essentially extend the markup exemption to all 100% Canadian wine regardless of the province of production. This makes sense on a national level ... why should one province discriminate against wine produced in a different province? BC wineries can now hope that other Canadian provinces will adopt a similar approach to the application of markup and thus permit BC wineries to ship to other Canadian provinces free of liquor board markup. Indeed, from a legal perspective, there is a very good argument that this approach is required by law in many provinces because s.121 of the Constitution Act guarantees a "free trade" zone within Canada for Canadian produced products. Without getting into the details, this law generally requires that, while a province can impose taxes on to products coming from another province (e.g. sales taxes), it cannot impose fees or charges on to goods from another province which it does not impose on the same goods within the province. In other words, if a province exempts its own wines from liquor board markup, it cannot charge that markup on wines from another province.
On a less positive note, BC's new approach is likely to raise international trade law problems as it is inconsistent with Bill C-311's neutral approach to all wine within Canada. Bill C-311 was carefully crafted to ensure trade agreement compliance by treating all wine the same regardless of wine type or origin. Indeed, I testified before the House of Commons Finance Committee that it was my opinion that all wine (domestic or imported) had to be treated the same in order to comply with Canada's obligations under NAFTA and GATT. In this regard, BC's new approach could prompt a trade agreement challenge since it provides preferential treatment to Canadian wine. BC wine consumers may also be partly disappointed since the new policy does not permit them to order wine direct from a retailer in another province. In this respect, BC has not followed the lead of Alberta and Manitoba which have opened their provincial borders to all inter-provincial wine shipments regardless of wine type and origin. The new approach also raises questions of enforceability ... will wine consumers/wineries/retailers/shipping companies really care what is in the bottle when they process an order?
BC Announces New Shipping Rules ... for Canadian Wine Only
- Thursday, 12 July 2012 06:50
- Written by Mark Hicken
The BC Government has just announced that they will permit inter-provincial wine importations from other provinces free of provincial liquor board markup (which is a form of hidden tax) but only if the wine is 100% Canadian wine and only if the wine is shipped from the producing winery in the other province. While this is a step in the right direction and an improvement on the BC government's previously announced position (which restricted BC residents to "in-person" possession of a cumulative total of 1 case of imported wine at any given time), it is inconsistent with Bill C-311's neutral approach to all wine within Canada (i.e. domestic vs. imported and winery vs. retailers) which was carefully crafted to ensure trade agreement compliance and to benefit all wine consumers. BC's new approach could cause a trade agreement challenge since it provides preferential treatment to Canadian wine. In this respect, BC has not followed the lead of Alberta and Manitoba which have opened their provincial borders to all inter-provincial wine shipments regardless of wine type and origin. More analysis to come.
BC Govt Cancels Moratorium on Private Liquor Retail Licenses ... in 10 Years
- Friday, 29 June 2012 14:49
- Written by Mark Hicken
The BC Government has amended the Liquor Control and Licensing Regulation to remove the moratorium on the issuance of private retail liquor store licenses which is currently contained in s.14 of the Regulation (see this Order in Council). However, the effective date of the cancellation is ten years from now ... on July 1, 2022. Perhaps there will be additional announcements to make sense of this development.
Canadian Wine Shipping Reform Becomes Law
- Thursday, 28 June 2012 08:05
- Written by Mark Hicken
Bill C-311, the federal wine shipping reform amendment, becomes law today at approximately 2 pm eastern time (11 am pacific). Canada will now have a limited national personal use exemption for the inter-provincial shipment of wine. The amended text of the relevant part of the Importation of Intoxicating Liquors Act now reads as follows:
3. (1) Notwithstanding any other Act or law, no person shall import, send, take or transport, or cause to be imported, sent, taken or transported, into any province from or out of any place within or outside Canada any intoxicating liquor, except such as has been purchased by or on behalf of, and that is consigned to Her Majesty or the executive government of, the province into which it is being imported, sent, taken or transported, or any board, commission, officer or other governmental agency that, by the law of the province, is vested with the right of selling intoxicating liquor.
(2) The provisions of subsection (1) do not apply to
…
(h) the importation of wine from a province by an individual, if the individual brings the wine or causes it to be brought into another province, in quantities and as permitted by the laws of the latter province, for his or her personal consumption, and not for resale or other commercial use.
As is apparent from the text, the amendment permits provincial law to affect the availability of the amendment. More information will become available on this issue in the coming weeks as analysis is completed on the effects of the relevant provincial laws. However, the current law in some provinces (such as Alberta and Manitoba) is clear that importation will be allowed in any reasonable quantity for personal use. Unfortunately, wineries and wine consumers in British Columbia are still waiting for the B.C. government to do the right thing and open this province to wine shipping. See this page for updates on this issue: Shipping Laws on Wine Within Canada.
Huge thanks go out to Dan Albas MP, Ron Cannan MP, Shirley-Ann George (of FreeMyGrapes.ca) and the Canadian Vintners Association for this historic progress.